Gates Gets With a New Program for Microsoft

Software: Despite looming antitrust remedies, the company plans initiative to combine Windows and the Web.

REDMOND, Wash. — For the first time in 20 years, Microsoft Corp. founder Bill Gates has gone back to designing software. His vision, being carried out with the help of a secretive eight-member team, is to merge the company's Windows operating system with the Internet to create a new generation of online services.

There's only one problem. If the U.S. Justice Department and 19 state attorneys general succeed in breaking apart the software giant, none of this can happen. Government attorneys vow to scrutinize every word uttered by Gates and other senior Microsoft leaders when they present the company's strategic Internet vision June 1.

Microsoft's new initiative--called Next Generation Windows Services--aims to combine Windows products and the Internet in a way that could transform how information is communicated and how transactions are conducted.

But in addition to the antitrust cloud hanging over Microsoft's head, several Microsoft rivals--Sun Microsystems, IBM, Oracle Corp. and Linux--are racing ahead with competing products and systems that could leave the Redmond, Wash.-based software giant in the dust.

Not only do these rivals control the server market, they each have been disclosing similar plans to offer various Web services that aim to compete directly with Microsoft's vision.

A spokesman for Iowa state Atty. Gen. Tom Miller, who is leading the management of the government's antitrust litigation against Microsoft, said the states "are watching with interest" the software giant's new initiative but have no immediate plans to go to court and block the effort.

Another state lawyer said Microsoft's new initiative will probably further strain Microsoft's already poor relationship with U.S. District Judge Thomas Penfield Jackson rather than gain the company any immediate advantage in the marketplace.

"Microsoft has shown over and over again that it is willing to go to almost any length to use its monopoly to gain an advantage in the marketplace," said a spokesman for one of the states.

So far, though, Microsoft executives have shown no inclination to back down, saying integration is central to what some have called a "bet-the-company" strategy that rivals any previous challenge it has faced.

"Microsoft cannot undertake such a risky venture, which will cost more in constant-dollar terms than Boeing's development of the 747 or NASA's first mission to the moon, unless Microsoft can call upon all of the company's resources in seeking to make it a success," the company said in court documents. "Those resources include people and technologies on both sides of the bright line the government seeks to draw through Microsoft's tightly knit organization."

Few details of Microsoft's new initiative have emerged. But recent speeches and interviews by Microsoft and industry executives outline a plan that aims to transform the Internet experience from the more passive act of simply looking at Web sites to being able to program and manipulate information from those sites.

For example, a musician might want to program a set of auction services to look for a particular type of guitar. When the item shows up for the hoped-for price, perhaps in the middle of the night, the computer can bid on the item and electronically tell the bank to transfer the funds to the supplier.

Or if an airline flight is rescheduled, colleagues and family members would be automatically notified, and the traveler's calendar would be updated to reflect the change.

"Today, you can't do this," said Jim Allchin, group vice president of platforms for Microsoft and a key architect of the new strategy. "Tomorrow, you will. It's all about taking advantage of all the services that will exist on the Internet."

These advances could benefit consumers and businesses as they try to take advantage of the changes being driven by the Internet--changes that are reshaping how individuals and companies do business. Already, the Internet has spawned electronic consumer auctions and business-to-business exchanges.

The growth of e-commerce is unleashing an explosion of online transactions that industry experts say will continue to grow at a rapid clip. By 2002, Gartner Group, a technology-consulting firm, predicts 10,000 online trading exchanges, up from 400 today.

In a May 9 speech, Gates offered a glimpse of the ideas that will serve as the foundation for Microsoft's new initiative.

"We can really think of the Internet as a platform, where we have programs that work between multiple sites, where we have programs that are essentially written to the Internet and can empower knowledge workers to see information about the economy, or their market, on a single screen that combines information from many places," Gates said.